Rare Move: Telecom Rivals Team Up on App Payments

China’s three state-run telecom carriers are not known for their cooperative abilities, be it with each other, with customers or even with partners.

So it comes of something of a surprise that China Unicom (Hong Kong) Ltd. is joining up with China Mobile Ltd. — and in the future possibly China Telecom Corp. — to offer a single standardized payment plugin that could be used by the country’s many app developers and app stores.

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The two launched a prototype of the plugin on April 27, China Unicom Deputy General Manager Shen Zhou told China Real Time earlier this week.

The rare decision to cooperate comes as all three Chinese telecom operators come under increasing pressure from the rise of smartphone applications, like Tencent’s WeChat, that have made traditional telecoms services like voice calls and text messaging obsolete.

It’s also a bid by the China Mobile and China Unicom to beef up their ability to tap into the quickly rising amounts of revenue being generated by consumer spending on mobile applications, in particular games.

Currently 60% of users who pay money within applications or for an application make use of payment services run by telecom carriers, according to Mr. Shen. That means users opt either to use top-up cards, which can be purchased at many convenience stores around China, or their phone bill to pay for services on their smartphone.

“Originally games were for hardcore gamers,” Mr. Shen said, adding “but mobile games attract everyone from five- and six-year olds to 70- and 80-year olds. This development brings in new revenue from a new source.”

Analysts generally agree with the move, pointing out that payment standardization would be a great boon to application developers in China, who currently are forced to integrate a number of different payment platforms into their applications, slowing down the time to market.

“This will make it infinitely easier for app developers to get their apps reviewed and approved at once, rather than multiple times,” said Mark Natkin, managing director of Beijing-based technology research group Marbridge Consulting.

The deal is also likely to help the telecom companies garner more revenue by cutting out the increasing number of companies that act as middle men between telecoms and content creators, like app developers. These companies, which take a cut in the revenue, make their money by navigating the at times byzantine bureaucratic structures and licensing processes needed to get approval to register for payment with all three of China’s major telecoms.

The new platform could also make life easier for China Mobile and China Unicom customers – an important consideration for a pair of companies that are routinely singled out by Chinese social media users as ranking among the country’s most despised state-owned enterprises.

“In terms of distribution channels as well as payment options….the market gets better, more logical, you can start to connect with one single source of monetization, it’s good for everyone,” he added.

Nonetheless, China Unicom’s Mr. Shen said the plugin is still is only a prototype and it will take more work to make it a true standard, which means that the operators will continue to discuss options with China Telecom, popular third-party app stores run by Internet companies like Qihoo 360 Technology Co., and other smaller payment providers. Mr. Shen said China Unicom and China Mobile were still in the process of integrating the many companies that provide top-up card services around the country into the payment platform.

Mr. Shen, who is in charge of Wo Store, China Unicom’s application store, said the store has grown quickly since it was launched earlier this year. In the first quarter, he said the store brought in more than 30 million yuan in revenue and is targeting 200 million to 300 million yuan in revenue for the entire year.

(CORRECTION: An earlier version of this post misspelled Bertrand Schmitt’s name. The earlier version also said that China Unicom and China Mobile would launch a prototype of the payment plugin on May 17. In fact, the prototype was launched on April 27.)

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